Bill Monning and Susan Bonilla: Transportation network companies must protect the public

By Bill Monning and Susan Bonilla

Special to the Mercury News

Posted:
07/30/2014 10:40:39 AM PDT

Smartphone applications can offer consumers a convenient way to hail a ride by connecting them with drivers who use their personal vehicles. Companies that provide the software, such as Uber and Lyft, are called transportation network companies or "TNCs."

Most TNCs set rates, track mileage, and charge consumer's credit cards. Behind the scenes, they use real-time data and analysis to anticipate demand and set rates, and through mass communication and driver incentives, they drum up supply. TNCs are not just software providers, they also act as the central nervous systems for extensive transportation networks.

Popular with consumers, these services also offer economic opportunities to drivers. But by relying on nonprofessionals, TNCs also shift business risks from investors to personal insurance consumers, TNC drivers, and accident victims.

Although the Public Utilities Commission requires TNCs to carry at least $1 million in liability insurance while providing TNC services, Uber and Lyft interpret this to mean that they only need insurance after a passenger has been matched with a driver. Nonetheless, they provide $50,000 per person of insurance once a driver logs into their system, but only if a driver's personal policy is exhausted or denies a claim.

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This approach ignores the fact that insurance is a group activity. Everyone in a group shares the cost of an accident. Personal use auto insurance is priced separately from commercial policies, like taxis, to keep rates low. The use of personal auto policies to cover TNC driver-caused accidents could unfairly raise the cost of car insurance for all Californians and, personal auto policies exempt coverage for any commercial use of the vehicle.

Moreover, this low level of coverage leaves drivers and accident victims vulnerable to financial catastrophe. The National Highway Traffic Safety Administration estimates that, in 2010 dollars, the average medical costs for an accident involving serious to critical injuries range from $70,902 to $441,618 per person, and does not include lost wages, legal fees, pain and suffering, etc.

If accident victims are not fully compensated, TNC drivers themselves could be liable and their wages, homes, property, and savings vulnerable to garnishment, liens, or forfeiture.

On New Year's Eve, an Uber driver struck the Liu family in San Francisco, killing 6-year old Sophia and seriously injuring her mother and brother. The driver did not have a passenger and Sophia's mother saw him looking at his smartphone just before the crash. The family's medical expenses have already approached $200,000 and continue to climb. Along with Uber, the subsequent lawsuit names the driver as a defendant.

Clearly, $50,000 is not nearly enough to pay for a serious injury, much less a fatality. To accommodate multiple victims or catastrophic accidents, we support AB 2293 that would require TNCs to provide up to $750,000 of insurance for accidents that occur while the driver is "open for business" but before the passenger is matched--the period when Sophia was hit.

Unlike taxis that carry 24-hour commercial insurance, TNCs already receive preferred regulatory treatment. These are highly profitable enterprises. Uber's value has grown to over $17 billion since it was launched in San Francisco in 2010. TNCs have no excuse for shifting their costs to personal insurance consumers or accident victims and leaving their drivers and consumers vulnerable.

Senator Bill Monning, D-Carmel, is chair of the Senate Committee on Insurance. Assemblywoman Susan Bonilla, D-Concord, is the author of AB 2293. They wrote this article for this newspaper.